Empire Energy Group Limited (“Empire” or the “Company”) is pleased to advise shareholders that it has entered into a Purchase and Sale Agreement (“PSA”) with Mai Oil Operations, Inc (“Mai Oil”) for the sale of its Kansas assets for US$19.1 million.
Image: Onshore oil and gas pumps. Photo: courtesy of Vlado/FreeDigitalPhotos.net.
The sale proceeds will principally be used to retire debt to a maximum remaining gross debt balance of US$8 million, while retaining a proportion from the sale proceeds for working capital and continued investment in Empire’s core Northern Territory shale assets.
The sale will enable Empire to retain cash flow positive production from its New York State and Pennsylvania (“Appalachia”) gas production assets and the substantial upside potential of the Marcellus Shale and Utica Shale rights in New York State.
The execution of the PSA comes following a competitive tendering process with numerous interested parties in Australia and the United States of America and receipt of expressions of interest from multiple parties.
The sale is expected to complete in Q3 2019.
Alex Underwood, Chief Executive Officer of Empire said, “The sale of the Kansas assets represents a key milestone in the execution of Empire’s strategy to build value for shareholders through the reduction of debt and the continued focus on exploration and development in the McArthur and Beetaloo Basins.
“Over the last year management and the Board have concentrated their efforts on the active repair of Empire’s balance sheet to favourably position the company for growth in the McArthur and Beetaloo Basins. The execution of a recapitalisation and debt reduction program, as well as the Kansas asset sale has enabled us to substantially reduce debt and increase our working capital position ahead of the exploration and development program in the Northern Territory.”
The recapitalisation and debt reduction program has resulted in a decrease of outstanding net debt from US$36.8 million at 30 June 2018 to US$22.6 million currently. Net debt will be further reduced to approximately US$5 million following completion of the Kansas sale.
ENHANCED CASH POSITION
Empire’s cash balance has increased from US$1.1 million at 30 June 2018 to approximately US$2.8 million at 30 June 2019. Cash proceeds from the Kansas assets sale after debt repayment will further complement the Company’s cash balance to support its Northern Territory development plans.
APPALACHIAN GAS PRODUCTION ASSETS
Following the sale of the Kansas assets, Empire will retain its cash flow positive Appalachia gas production assets, and all of its interest in the Marcellus and Utica Shale acreage which underlies the New York State gas production.
The positive cash flow generated by the Appalachia gas production assets will service the remaining debt.
Empire holds its Marcellus Shale and Utica Shale acreage at little to no cost.
Source: Company Press Release